FFor greater than 25 years, my clan have been bundling monthly subscriptions of a minimum of £50 to the Patrick Investment Club.
This club has had a profound impact on helping us find out about investing. It also helped bring us together as a family.
The interest is so great that lately we are inclined to meet on the club’s annual general meeting slightly than Christmas dinner!
Clubbing together
The Patrick Investment Club was founded in 1998 by six relations. My three brothers and I – then in our twenties – and our parents of their late 50s.
Since then, the club has doubled in size and now consists of three generations.
We spent our early years poring over library copies and trying to know business valuations. Back then, we were strangely confident that we could discover corporations destined to be the “makers” of the long run.
Unfortunately, none of us have identified any of the FAANGS, despite the fact that we had a multibagger success at Imagination Technologies.
There were also just a few dogs. One of them, Island Oil and Gas, disappeared into the ocean – together with our stake.
Nowadays – and with total assets within the low six-figure range – we’re a bit more cautious. About 70% of assets are held in a world equity tracker and 30% in three sector ETFs.
Why start an investment club?
Back then, our investment club, like many others, was founded to take a position in corporations and help us find out about investing.
At our founding meeting we adopted a statute that regulates how we work.
We have also opened a club checking account with Barclays and naturally an investment trading account – currently with Hargreaves Lansdown.
A golden rule that has at all times guided all of our investments was inspired by our pacifist, teetotal mother: Absolutely.
Therefore, we conduct an ethical SRI review, but don’t take a too close have a look at what exactly we hold in our funds.
The entrance fee
Family members invest a minimum of £50 every month. Some invest as much as £200.
Monthly investments are automated and freed from charge via our investment platform.
The club is run with a lightweight hand by the three officers: Chairman, Secretary and Treasurer. These roles alternated between relations through the years, with one – this author – being a civil servant throughout.
The Club’s investment strategy is reviewed at each Annual General Meeting. We express our condolences to one another for our underperformance and provides one another a pat on the back once we occasionally exceed our global benchmark.
The monthly statements list the present value of members’ holdings, subs received and any withdrawals, in addition to changes over the past one, six and twelve months.
In order to take sub- and ad hoc withdrawals into consideration, the stocks are summarized. Brief comments are included indicating how the club’s performance compares to the MSCI World Index.
A more virtual investment club
Except on the annual general meeting, member engagement is low – but misjudgments are quickly noticed.
Given the variety of members involved and their locations – spread across Glasgow, Nottingham and rural Wales – the AGM is now typically a combination of face-to-face and video conferencing.
In the early years, the final meeting at all times took place in person. This was normally followed by a meal together or one other social activity. One yr we felt comfortable enough to rent a barge for the afternoon.
Accounting activity
The lack of any tax advantages for investment clubs implies that all dividend and interest income, nevertheless small, have to be reported to members in April annually for inclusion on their tax returns.
Members largely follow a buy-and-hold strategy. Capital withdrawals are rare. Among the 12 members there are perhaps two or three per yr. Typically this involved paying an unexpected tax bill, financing a cruise, or making a down payment on a brand new home.
In the early years, a hardship fund was arrange to provide or lend money to members during harder times. For example, funds have occasionally been requested to assist a member transition from one job to the following or to finance skilled retraining.
Fortunately, such support has not been requested recently.
The development of an investment club
Looking back over the past 25 years, the club’s investment style has evolved in three phases.
We shifted from investing in individual stocks to actively managed funds after which moved to our current approach of investing in global passive ETFs – with a give attention to specific sectors that we consider will outperform.
In the primary 15 years as much as 2013, the association invested in individual stocks. These included M&S, Tesco, WPP, Severn Trent and St James Place – in addition to the aforementioned dog and multi-bagger.
The second phase began after a friendly financial advisor reviewed our portfolio and really helpful switching to actively managed funds and bonds.
Over the following six years we built modest holdings including: F&C Corp & Ethical Bonds, First State Global Property, Henderson Global Care, Impax Environmental Markets, Kames Ethical Fund, First State China Growth, Henderson European, Neptune US Opportunities, Old Mutual UK Small Companies and Aberforth UK Smaller Companies Fund.
These decisions often reflected club members’ personal possessions, comparable to an embrace of China and environmental funds.
Lessons learned
In retrospect, we had far too many investments. However, we learned how funds work, what fee structures they’ve and the way bonds are valued. We also began to higher understand our own attitudes to risk. For just a few years we even offered our members the alternative between contrasting portfolios.
In 2019, we made one other major shift – this time to investing passively in a single portfolio. This was partly resulting from members’ personal portfolios taking up a more passive orientation and partly resulting from the influence of .
Active funds were sold and we became increasingly focused on only one passive global equity SRI ETF held at iShares.
Additionally, certainly one of our younger members had begun a profession in asset management. They made compelling arguments to focus our portfolio on clean energy, automation and robotics, and global healthcare.
We each invested 10% of our total assets in three passive ETFs – one per sector. The annual realignment takes place within the spring, normally after the final meeting.
Three years on, our sector bets have collectively left us with a loss, although automation and robotics have helped minimize this with a wonderful 38% return last yr. With our AGM approaching, we’ll soon be discussing whether to stick with these sectors or move elsewhere.
Many glad returnees
The club’s annual growth over 25 years is 9.5%. This implies that £100 invested at first in 1998 would now be value £338.
In comparison, the MSCI World Index has increased 11.9% on an annual basis over the past 20 years.
Looking back over the past 25 years, relations have seen that being a part of the club has provided enormous educational advantages. We learned concerning the mechanics of investing, the performance of various asset classes, and the risks related to these assets.
With a bigger membership, including two junior members, giving a wider age range, we now have needed to increasingly think concerning the impact of various time horizons on our investment style.
Our willingness to take risks also varies. Members consider their club holdings to be a modest portion of their overall assets. If they’re uncomfortable investing 100% in stocks, they’ll compensate for this with personal holdings of less dangerous assets.
There is at all times a full of life debate about our investment style at the final meeting. Some members argue that we usually are not on the forefront on the subject of identifying outperformers and due to this fact we want to maneuver to low-cost passive investing.
Others take a more comprehensive approach. They advocate for the club to invest in a greater diversity of assets, including specific corporations, currencies and commodities, to provide us hard-won “skin-in-the-game” experiences.
The wind is currently blowing in favor of a largely passive approach.
Discounts for members
The Patrick Investment Club had an interesting influence on family relationships. We learn from one another no matter age and life experience!
Some of us have gone on to administer our own ISA and SIPP portfolios. And as mentioned above, one younger member is even pursuing a profession in wealth management – inspired by the club.
The club has also contributed to family cohesion. Often all of us only meet – virtually or in person – at the final meeting.
The democratic nature of the club – one member, one vote – sometimes presents a challenge for those with larger stakes.
Overall, our investment club had an especially positive impact on the family. Having already welcomed several younger members, it is predicted to proceed for one more 25 years.
